April 1998(DRAFT)
Observations on the Creation of a Retail Settlements. Reconciliation. Clearing,
Payment & Information Services Agency
Opening:
Deregulation of the electricity industry and the associated market restructuring
has led to significant increases in the degree of both business-to-business and
customer-to-business information and financial transactions. These transactions
share a corresponding rise in complexity and volume. The evolving nature of
policies, practices, processes and systems supporting these changes, currently
show opportunities for substantial improvements in quality and integrity of the
associated data and information flows and, the need for major improvements in
operational efficiencies and, financial management of cash flows/clearing
processes.
This condition is not a surprise but, rather the expected order of events
arising from rapid and tumultuous changes being effected in the structure and in
the economics of the Electricity industry. The USA circumstances are consistent
with those previously experienced by PSC in the early and continuing phases of
deregulatory change of the United Kingdom's electricity and gas markets.
California marks the first of the restructured industry models being implemented
in the United States. As such, this State, holds the potential of either heavily
influencing or, becoming the defacto standard for those processes and systems it
adopts to manage the physical and financial transactions underlying its
electricity market.
PSC possess significant experience and knowledge of the California marketplace
and, the underlying processes, systems and rules governing the exchange of
physical and financial information between the market participants. It is our
intent to channel this talent into the creation of a service offering for the
California market which will address needs of all market participants through a
focus on enhancing retail data quality and integrity. The solutions set model
arising from these efforts is seen as providing the foundation for repeating
this offering across the USA.
Situation:
The California Public Utility Commission, in its Decision 97-12-090, dated
December 16th, 1997, recognizes the need for creation of services and processes
to improve the quality and integrity of retail data needed for a restructured
electric marketplace to function.
This Decision recognizes the need for:
o Full and enhanced access and information exchange of customer information
between market participants
o The ability to track various electricity service transactions (physical and
financial) covering the ISO controlled grid.
o Standards to identity each meter instrument and all associated
characteristics plus events related to that meter, plus ensuring the
retention and survivability of metering information
This Decision calls for:
o The adoption and implementation of a common customer data identifier seen
as a "Universal Node Identifier System" (UNI) unique to every node or
service delivery point (SDP) on the distribution wires systems of the
Utility Distribution Companies (UDC's) thereby creating a unique number to
each billable energy path (associating
o The adoption and implementation of a Universal Identifiers Supplement for
unique identification of each meter
o The possibility of creating a central respository for the the management of
information pertaining to meter identification, accuracy testing,
maintenance, and meter date usage.
And, the Decision suggests that the market may be best served if:
o An independent third party develops the UNI System and operates this
service on an out-source basis to the market
o An independent third party could compare all scheduled transactions at
each SDP to ensure transactions are attributed to the correct SC, ESP
and UDC.
o An independent third party serve as the clearinghouse of metering data
and usage information for the market
While the Decision offers directives on other matters such as customer status
information e.g. life support equipment tracking, sharing of customer payment
information, notifications to the Meter Data Management Agent (MDMA), and,
notifications by the Scheduling Coordinator (SC), etc.; its more critical
declarations can be found in the CPUC's warnings over the lack of mechanisms In
place to ensure that all energy consumed by end-user customers is accounted for
in settlements at the ISO.
Balancing is complicated by the fact that the ISO and the SC's will not handle
individual customer usage data for most customers and, therefore, will not have
the means to verify whether reported usage equals actual usage. This problem is
noted as representing an enormous risk to the market brought about both through
intentional and unintentional errors in data processing, handling and
forecasting.
Separate from the report, estimates of the level of inaccuracy or unaccounted
for energy imbalances which may result have been expressed in terms of up to a
$1 Billion of "losses". This figures represents almost 5% of the total
California market.
Overview of Present Process Flow:
See attached power point illustration (work-in-progress) Market
Participants/Shareholder Interests:
Each class of market participant is perceived to hold convergent interests for
the success and efficiency of those processes defining the market place.
The Utility Distribution Companies wish to avoid non recoverable or unidentified
energy usage as it may reduce recovery of the competitive transition charge
(CTC) thus threatening agreed economic recovery of stranded investment expense.
The Power Marketers wish to avoid the appearance of market inefficiencies or
inadequacies which could delay opening of the electricity markets created by
loss of customer confidence or intervention actions by regulators
The Scheduling Coordinators, who are held accountable for completeness and
accuracy of ESP schedules, are without the means to deliver on this
accountability as can be seen from the attached illustrations. Risk mitigation
is one consideration in this process another is to ensure accuracy in
settlements for its customers.
Energy Service Providers are interested in means to facilitate market
participation and, to minimize credit instruments and other actions required to
mitigate or cover risks.
Generators are interested in the accuracy of forecasts and schedules to support
effective and economical operations.
The California Power Exchange is both interested in services to its clients and
in protecting its clients plus customers from energy costs being shifted onto
others in the market as a result of fraud and inaccuracies. The integrity of the
market is a prime driver.
The Independent Service Operator is concerned with Issues of reliability which
could arise from inaccurate load forecasting and imbalances. Optimization of the
operating environment forms a key concern. Unidentified system losses can cause
dramatic and unforeseen shifting of load and generation to meet imbalances.
The California Legislature and PUC are concerned that the grand experiment upon
which the State has embarked and in which it is leading the nation be
successful.
All players are concerned with lengthy process of disputes, investigation,
reconciliation and settlements which both introduces cost and which effects cash
flow (cost of capital). The more defined and integrated the underlying processes
can be made to act, the greater chance of securitization of the financial
streams.
Market Sizing
Services under consideration cover a range of offerings encompassing the entire
market e.g. $20 Billion.
It is expected that complexity of services offered will vary between different
classes of participants and, different classes of customers. Clearing and
settlements of regulated customers services would continue to be seen as
involving settlements of bundled schedules primarily concentrating on
reconciling or providing audits of transactions between the UDC the PX and the
ISO. On the other hand, clearing and settlements of "choice" customers would
need be unique to the individual retail customer level and may involve clearing
of physical energy, services and payments between the ESP, the UDC, the MSP, the
MDMA, the SC and the ISO.
Outline of a Service Solutions Set
(Under development- see attached power points)
Customer Registration and Enrollment Clearinghouse- UNI and master listing of
service providers Centralized MDMA and meter data information Clearinghouse
Centralized Transactional Schedule Clearinghouse and Analysis Center (includes
forecasting) Centralized Dispute Reconciliation and Audit Information Service
Centralized Settlements and Payments Clearinghouse (includes registered
bilaterals & CFD's)
Service Approaches
(under development, see comments on process flow diagrams)
//es//
April 1998(DRAFT)
Observations on the Creation of a Retail Settlements. Reconciliation. Clearing.
Payment & Information Services Agency
Opening:
Deregulation of the electricity industry and the associated market restructuring
has led to significant increases in the degree of both business-to-business and
customer-to-business information and financial transactions. These transactions
share a corresponding rise in complexity and volume. The evolving nature of
policies, practices, processes and systems supporting these changes, currently
show opportunities for substantial improvements in quality and.integrity of the
associated data and information flows and, the need for major improvements in
operational efficiencies and, financial management of cash flows/clearing
processes.
This condition is not a surprise but, rather the expected order of events
arising from rapid and tumultuous changes being effected in the structure and in
the economics of the Electricity industry. The USA circumstances are consistent
with those previously experienced by PSC in the early and continuing phases of
deregulatory change of the United Kingdom's electricity and gas markets.
California marks the first of the restructured industry models being implemented
in the United States. As such, this State, holds the potential of either heavily
influencing or, becoming the defacto standard for those processes and systems it
adopts to manage the physical and financial transactions underlying its
electricity market.
PSC possess significant experience and knowledge of the California marketplace
and, the underlying processes, systems and rules governing the exchange of
physical and financial information between the market participants. It is our
intent to channel this talent into the creation of a service offering for the
California market which will address needs of all market participants through a
focus on enhancing retail data quality and integrity. The solutions set model
arising from these efforts is seen as providing the foundation for repeating
this offering across the USA.
Situation:
The California Public Utility Commission, in its Decision 97-12-090, dated
December 16th, 1997, recognizes the need for creation of services and processes
to improve the quality and integrity of retail data needed for a restructured
electric marketplace to function.
This Decision recognizes the need for:
o Full and enhanced access and information exchange of customer information
between market participants
o The ability to track various electricity service transactions (physical and
financial) covering the ISO controlled grid.
o Standards to identity each meter instrument and all associated
characteristics plus events related to that meter, plus ensuring the
retention and survivability of metering information
This Decision calls for:
o The adoption and implementation of a common customer data identifier seen
as a "Universal Node Identifier System" (UNI) unique to every node or
service delivery point (SDP) on the distribution wires systems of the
Utility Distribution Companies (UDC's) thereby creating a unique number to
each billable energy path (associating
o The adoption and implementation of a Universal Identifiers Supplement for
unique identification of each meter
o The possibility of creating a central respository for the the management of
information pertaining to meter identification, accuracy testing,
maintenance, and meter data usage.
And, the Decision suggests that the market may be best served if:
o An independent third party develops the UNI System and operates this
service on an out-source basis to the market
o An independent third party could compare all scheduled transactions at
each SDP to ensure transactions are attributed to the correct SC, ESP
and UDC.
o An independent third party serve as the clearinghouse of metering data
and usage information for the market
While the Decision offers directives on other matters such as customer status
information e.g. life support equipment tracking, sharing of customer payment
information, notifications to the Meter Data Management Agent (MDMA), and,
notifications by the Scheduling Coordinator (SC), etc.; its more critical
declarations can be found in the CPUC's warnings over the lack of mechanisms in
place to ensure that all energy consumed by end-user customers is accounted for
in settlements at the ISO.
Balancing is complicated by the fact that the ISO and the SC's will not handle
individual customer usage data for most customers and, therefore, will not have
the means to verify whether reported usage equals actual usage. This problem is
noted as representing an enormous risk to the market brought about both through
intentional and unintentional errors in data processing, handling and
forecasting.
Separate from the report, estimates of the level of inaccuracy or unaccounted
for energy imbalances which may result have been expressed in terms of up to a
$1 Billion of "losses". This figures represents almost 5% of the total
California market.
Overview of Present Process Flow:
See attached power point illustration (work-in-progress) Market
Participants/Shareholder Interests:
Each class of market participant is perceived to hold convergent interests for
the success and efficiency of those processes defining the market place.
The Utility Distribution Companies wish to avoid non recoverable or unidentified
energy usage as it may reduce recovery of the competitive transition charge
(CTC) thus threatening agreed economic recovery of stranded investment expense.
The Power Marketers wish to avoid the appearance of market inefficiencies or
inadequacies which could delay opening of the electricity markets created by
loss of customer confidence or intervention actions by regulators
The Scheduling Coordinators, who are held accountable for completeness and
accuracy of ESP schedules, are without the means to deliver on this
accountability as can be seen from the attached illustrations. Risk mitigation
is one consideration in this process another is to ensure accuracy in
settlements for its customers.
Energy Service Providers are interested in means to facilitate market
participation and, to minimize credit instruments and other actions required to
mitigate or cover risks.
Generators are interested in the accuracy of forecasts and schedules to support
effective and economical operations.
The California Power Exchange is both interested in services to its clients and
in protecting its clients plus customers from energy costs being shifted onto
others in the market as a result of fraud and inaccuracies. The integrity of the
market is a prime driver.
The Independent Service Operator is concerned with issues of reliability which
could arise from inaccurate load forecasting and imbalances. Optimization of the
operating environment forms a key concern. Unidentified system losses can cause
dramatic and unforseen shifting of load and generation to meet imbalances.
The California Legislature and PUC are concerned that the grand experiment upon
which the State has embarked and in which it is leading the nation be
successful.
All players are concerned with lengthy process of disputes, investigation,
reconciliation and settlements which both introduces cost and which effects cash
flow (cost of capital). The more defined and integrated the underlying processes
can be made to act, the greater chance of securitization of the financial
streams.
Market Sizing
Services under consideration cover a range of offerings encompassing the entire
market e.g. $20Billion.
It is expected that complexity of services offered will vary between different
classes of participants and, different classes of customers. Clearing and
settlements of regulated customers services would continue to be seen as
involving settlements of bundled schedules primarily concentrating on
reconciling or providing audits of transactions between the UDC the PX and the
ISO. On the other hand, clearing and settlements of "choice" customers would
need be unique to the individual retail customer level and may involve clearing
of physical energy, services and payments between the ESP, the UDC, the MSP, the
MDMA, the SC and the ISO.
Outline of a Service Solutions Set
(Under development- see attached power points)
Customer Registration and Enrollment Clearinghouse- UNI and master listing of
service providers Centralized MDMA and meter data information Clearinghouse
Centralized Transactional Schedule Clearinghouse and Analysis Center (includes
forecasting) Centralized Dispute Reconciliation and Audit Information Service
Centralized Settlements and Payments Clearinghouse (includes registered
bilaterals & CFD's)
Service Approaches
(under development, see comments on process flow diagrams)
//es//
April 1998(DRAFT)
Observations on the Creation of a Retail Settlements, Reconciliation, Clearing.
Payment & Information Services Agency
Opening:
Deregulation of the electricity industry and the associated market restructuring
has led to significant increases in the degree of both business-to-business and
customer-to-business information and financial transactions. These transactions
share a corresponding rise in complexity and volume. The evolving nature of
policies, practices, processes and systems supporting these changes, currently
show opportunities for substantial improvements in quality and integrity of the
associated data and information flows and, the need for major improvements in
operational efficiencies and, financial management of cash flows/clearing
processes.
This condition is not a surprise but, rather the expected order of events
arising from rapid and tumultuous changes being effected in the structure and in
the economics of the Electricity industry. The USA circumstances are consistent
with those previously experienced by PSC in the early and continuing phases of
deregulatory change of the United Kingdom's electricity and gas markets.
California marks the first of the restructured industry models being implemented
in the United States. As such, this State, holds the potential of either heavily
influencing or, becoming the defacto standard for those processes and systems it
adopts to manage the physical and financial transactions underlying its
electricity market.
PSC possess significant experience and knowledge of the California marketplace
and, the underlying processes, systems and rules governing the exchange of
physical and financial information between the market participants. It is our
intent to channel this talent into the creation of a service offering for the
California market which will address needs of all market participants through a
focus on enhancing retail data quality and integrity. The solutions set model
arising from these efforts is seen as providing the foundation for repeating
this offering across the USA.
Situation:
The California Public Utility Commission, in its Decision 97-12-090, dated
December 16th, 1997, recognizes the need for creation of services and processes
to improve the quality and integrity of retail data needed for a restructured
electric marketplace to function.
This Decision recognizes the need for:
o Full and enhanced access and information exchange of customer information
between market participants
o The ability to track various electricity service transactions (physical and
financial) covering the ISO controlled grid.
o Standards to identify each meter instrument and all associated
characteristics plus events related to that meter, plus ensuring the
retention and survivability of metering information
This Decision calls for:
o The adoption and implementation of a common customer data identifier seen
as a "Universal Node Identifier System" (UNI) unique to every node or
service delivery point (SDP) on the distribution wires systems of the
Utility Distribution Companies (UDC's) thereby creating a unique number to
each billable energy path (associating
o The adoption and implementation of a Universal Identifiers Supplement for
unique identification of each meter
o The possibility of creating a central respository for the the management of
information pertaining to meter identification, accuracy testing,
maintenance; and meter data usage.
And, the Decision suggests that the market may be best served if:
o An independent third party develops the UNI System and operates this
service on an out-source basis to the market
o An independent third party could compare all scheduled transactions at
each SDP to ensure transactions are attributed to the correct SC, ESP
and UDC.
o An independent third party serve as the clearinghouse of metering data
and usage information for the market
While the Decision offers directives on other matters such as customer status
information e.g. life support equipment tracking, sharing of customer payment
information, notifications to the Meter Data Management Agent (MDMA), and,
notifications by the Scheduling Coordinator (SC), etc.; its more critical
declarations can be found in the CPUC's warnings over the lack of mechanisms in
place to ensure that all energy consumed by end-user customers is accounted for
in settlements at the ISO.
Balancing is complicated by the fact that the ISO and the SC's will not handle
individual customer usage data for most customers and, therefore, will not have
the means to verify whether reported usage equals actual usage. This problem is
noted as representing an enormous risk to the market brought about both through
intentional and unintentional errors in data processing, handling and
forecasting.
Separate from the report, estimates of the level of inaccuracy or unaccounted
for energy imbalances which may result have been expressed in terms of up to a
$1 Billion of "losses". This figures represents almost 5% of the total
California market.
Overview of Present Process Flow:
See attached power point illustration (work-in-progress) Market
Participants/Shareholder Interests:
Each class of market participant is perceived to hold convergent interests for
the success and efficiency of those processes defining the market place.
The Utility Distribution Companies wish to avoid non recoverable or unidentified
energy usage as it may reduce recovery of the competitive transition charge
(CTC) thus threatening agreed economic recovery of stranded investment expense.
The Power Marketers wish to avoid the appearance of market inefficiencies or
inadequacies which could delay opening of the electricity markets created by
loss of customer confidence or intervention actions by regulators
The Scheduling Coordinators, who are held accountable for completeness and
accuracy of ESP schedules, are without the means to deliver on this
accountability as can be seen from the attached illustrations. Risk mitigation
is one consideration in this process another is to ensure accuracy in
settlements for its customers.
Energy Service Providers are interested in means to facilitate market
participation and, to minimize credit instruments and other actions required to
mitigate or cover risks.
Generators are interested in the accuracy of forecasts and schedules to support
effective and economical operations.
The California Power Exchange is both interested in services to its clients and
in protecting its clients plus customers from energy costs being shifted onto
others in the market as a result of fraud and inaccuracies. The integrity of the
market is a prime driver.
The Independent Service Operator is concerned with issues of reliability which
could arise from inaccurate load forecasting and imbalances. Optimization of the
operating environment forms a key concern. Unidentified system losses can cause
dramatic and unforseen shifting of load and generation to meet imbalances.
The California Legislature and PUC are concerned that the grand experiment upon
which the State has embarked and in which it is leading the nation be
successful.
All players are concerned with lengthy process of disputes, investigation,
reconciliation and settlements which both introduces cost and which effects cash
flow (cost of capital). The more defined and integrated the underlying processes
can be made to act, the greater chance of securitization of the financial
streams.
Market Sizing
Services under consideration cover a range of offerings encompassing the entire
market e.g. $20Billion.
It is expected that complexity of services offered will vary between different
classes of participants and, different classes of customers. Clearing and
settlements of regulated customers services would continue to be seen as
involving settlements of bundled schedules primarily concentrating on
reconciling or providing audits of transactions between the UDC the PX and the
ISO. On the other hand, clearing and settlements of "choice" customers would
need be unique to the individual retail customer level and may involve clearing
of physical energy, services and payments between the ESP, the UDC, the MSP, the
MDMA, the SC and the ISO.
Outline of a Service Solutions Set
(Under development- see attached power points)
Customer Registration and Enrollment Clearinghouse- UNI and master listing of
service providers Centralized MDMA and meter data information Clearinghouse
Centralized Transactional Schedule Clearinghouse and Analysis Center (includes
forecasting) Centralized Dispute Reconciliation and Audit Information Service
Centralized Settlements and Payments Clearinghouse (includes registered
bilaterals & CFD's)
Service Approaches
(under development, see comments on process flow diagrams)
//es//